(Editor’s note: The
following is an edited version of a commentary that appeared in Dome Magazine on March 19,
2011.)

What
a governor does means more than what a governor says or what kind of people he
brings to his team. Gov. Rick Snyder has stated intentions and filled
appointments, but he must be judged by his executive actions and signatures on bills.
At this early stage in his term, Gov. Snyder’s actions are painting a picture
of a chief executive who could be quite strong on tax and fiscal policy.

His
most consequential act so far has been the introduction of his state budget. Gov. Snyder did three
important things when he sent his plan to the Legislature only seven weeks
after taking office. He led with his strength as a CPA-minded business
executive, he announced his most urgent priority, and he gave momentum to truly
beneficial changes.

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His
budget reduces spending by $1.2 billion, cuts taxes by a net $254 million in
2012 and simplifies the tax structure. In all three areas, it’s a significant
departure from current, failing policies, and the immediate net fiscal effect
is to close the projected $1.8 billion deficit.

The
spending reductions allow the state to live within its means without extracting
more from the ailing private sector. Not only would a tax increase have been
politically unpopular, but my colleagues estimate that Gov. Jennifer Granholm’s
proposed sales tax hike, for
example, would have eliminated 30,000 more jobs. Gov. Snyder’s proposed $1.1
billion business tax cut should help
spur the re-creation of some of the more than 850,000 jobs we lost in the
last decade.

The
part of the budget with the most potential long-term impact, however, is the
tax simplification. Gov. Snyder’s plan largely reverses more than a decade of
failed attempts to create jobs through a constellation of special tax deals,
credits, gimmicks and subsidies targeted at the ever-changing industries du
jour.

Loved
by the politicians who make friends by giving away goodies — and the companies
that love to get goodies — programs like the Michigan Economic Growth Authority and
the film subsidies have not worked.
Ironically, Republican Gov. John Engler started us down this road with MEGA’s
creation. Gov. Granholm then doubled down on his unsuccessful initiative,
creating boutique incentive programs for film, battery, solar, windmill and other industries. While
officials churned out news releases
touting Michigan’s aggressive inducement campaigns and award-winning
commercials, we bled more jobs than any other state. The more we bribed certain
companies to come, the more our other employers found Michigan too expensive a
place to keep people on the payroll.

Scaling
back the incentive programs and removing a host of special exemptions from the
Michigan business tax will channel companies’ ingenuity and wealth into
creating jobs, not lobbying for loopholes or currying favor with politicians.
It sends a signal to businesses everywhere that Michigan is a place where
everybody knows the rules, and everyone plays by the same rules, which has not
been our approach since at least 1995.

The
few remaining business subsides in Snyder’s plan would go through the
appropriations process, not the tax code. This is a huge improvement because it
subjects each subsidy to public scrutiny before (not after) the deals are done,
and requires lawmakers to take stands on individual deals.

The
governor kicked a hornet’s nest when he proposed eliminating Michigan’s
generous income tax exemptions on pension
income, but the idea is entirely and admirably consistent with his approach
on the MBT: keep the rate low and treat everyone pretty much the same.

Politically,
it is a tough sell. Those whose taxes go up because of it won’t care if his
plan is a net tax cut. If he ends up having to compromise on this point, he has
plenty of room to cut spending elsewhere in the budget.

For
instance, my colleague James Hohman has calculated that if public-sector
workers’ benefits were merely benchmarked to private-sector averages, the
state, public schools and municipalities would save $5.7 billion each year. That’s
enough to close the deficit, eliminate the MBT entirely, fix the roads and
still have hundreds of millions of dollars left over. And it can be done
without cutting a single government job, wage or program.

One
of the first bills signed by the governor spends $25 million on the Pure Michigan tourism promotion
campaign. The tourism industry won’t
fund the program, even though its officials claim the ads are a big
moneymaker. If the going gets tough on the budget, Gov. Snyder may wish he had
that $25 million to fix potholes, pay pensions or train police.

However,
Gov. Snyder made an outstanding
decision when the Department of Human Services reversed a policy of his
predecessor that enriched unions at the expense of low-income children and
their caregivers. The Mackinac Center has represented three workers in a lawsuit
against the state seeking an end to this collection of millions of dollars in
so-called public-sector union dues from private day care owners and workers.
His decisive move frees up to 40,000 workers from a union if they don’t want to
associate with it, and stops letting the union use the state as its bag man.

Another
decision, to combine certain regulatory and permitting functions in a single
department, missed a big opportunity.
Environmental permitting should have been brought into this new department to
streamline the process and make it more responsive to the needs of job
creators. Unless the Department of Environmental Quality becomes at least as
concerned with protecting the economic ecosystem as it is with protecting the
rest of nature, the agency will act as a check on our growth that could offset
many of Gov. Snyder’s positive changes.

One
cannot address the structural challenges of Michigan’s governments without
confronting government unions. Gov. Snyder is taking a different approach, at
least in public, than some of his fellow Republican governors. The emergency
financial manager legislation he signed is a step in the right direction of
balancing unions’ abilities to push schools and municipalities — and their
taxpayers — into bankruptcy.

He
should not stop with the EFM
legislation. Several states do not confer collective bargaining privileges
on government unions at all, and Michigan could become one of them with an act
of the Legislature. Short of that, the governor could push for legislation that
would create open government employment, where no union could get a public
employee fired just because he or she doesn’t want to support the union.
Another option would be to simply stop performing the courtesy of collecting
dues for unions. Unions that have to collect their own dues from members have
stronger incentives to serve them well.

Gov.
Snyder has had a promising debut, especially on fiscal and tax matters. It’s
clear he’s the sort of person who is honest with himself about what balance
sheets and cash flow statements say. He views things through a fiscal lens,
which is a good place for a governor to start. To encourage job growth and
permit fiscal breathing room in the future, he must be equally strong on
regulatory and union matters.

#####

Joseph G. Lehman is president of the Mackinac Center for
Public Policy, a research and educational institute based in Midland, Mich. Permission
to reprint in whole or in part is hereby granted, provided that the author and
the Center are properly cited.